On the Philippine Rice Crisis

Fertilizer fund scam and irrigation fund scam affected local rice production
"Where are the P3.1 billion irrigation funds?"-KMP

^{News Release
April 5, 2008
Reference: Rafael "Ka Paeng" Mariano, chairman, KMP and president, ANAKPAWIS party list}

The militant Kilusang Magbubukid ng Pilipinas (KMP) took Department of Agriculture (DA) Secretary Arthur Yap and the National Irrigation Authority (NIA) to task by demanding them to show where more than P3.1 billion in irrigation funds went. The funds were released in two tranches: P500 million in January and P2.6 billion in March 2007.

The group said that the two scams affected rice production in the country because it diverted funds intended for the nation's staple food. "In the P728 fertilizer fund scam alone, more than 7,886,684 cavans of rice were lost because of Gloria's cheating--and it cost farmers P4,500 per 0.5 hectares for fertilizer. If we multiply this with the target area of 151,667 hectares, then peasants incurred P682,501,500 in debt (1 bag of fertilizer is worth 3 cavans of palay at P440 per cavan)."

According to Rafael "Ka Paeng" Mariano, chairman of KMP and concurrent president of ANAKPAWIS party list, "the DA and the NIA now has at least P8.8 billion for irrigation budget, but are still hard put to explain where the funds went. Our chapters have been reporting since June 2007 that generally no irrigation works or repairs have been done in their provinces. If they do see people working on irrigation they do some initial diggings for a day then stop. Maybe they just want their pictures to be taken for the report.

"We think that they have also learned from the P728 million fertilizer fund scam, so now they make showcase projects and present them to media--like what they did in Nueva Ecija--so that people will think that everything is above board. But majority of the supposed target areas for irrigation work have seen no such thing for the past 6 months. This goes counter to Sec. Yap's statement that the money was released during that time because they are maximizing the dry season for construction and repair," said Mariano.

"Take Isabela, Quirino, Cagayan, Nueva Vizcaya, Ilocos Norte, Kalinga and Tarlac for example. If the irrigation has been made or repaired during that time, then the dry spell last year would not have devastated so much crops in these provinces, which amounted to around P638 million. We have also checked with the local NIA offices and their reports show that their projects have not been started yet and a small number has not been completed. When we asked the local NIA what was taking so long, they replied that the funds have not been released. How can that be when the funds were made available as early as January 2007? Again, this contradicts Sec. Yap's argument that it was released during that time to maximize the dry weather," added the peasant leader.

"There is a certain stink to this and we fear that once again the funds allotted for farmers have been used to bankroll the election campaign of the administration, but this time it is at least three times bigger than the fertilizer scam. We have to get to the bottom of this; an independent and thorough probe should be launched by Congress," ended Mariano. #

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Oil Price Hikes More Frequent under Arroyo
Oil price increases under Pres. Arroyo’s term comprise almost 42 percent of total increases since the implementation of the Oil Deregulation law in 1996.


^{By IBON Foundation
Posted by Bulatlat
Vol. VIII, No. 8, March 30 – April 5, 2008}

Since the oil deregulation law was first implemented, much of the of the oil price increases happened under the Arroyo administration, and this is not only because of the length of the president’s term but because of her continued implementation of the oil deregulation law amid public outcry, and her imposition of the reformed value-added tax (RVAT) on oil.

Oil price increases under Pres. Arroyo’s term comprise almost 42 percent of total increases since the implementation of the Oil Deregulation law in 1996.

The Arroyo administration has done little to avert rising prices of petroleum products. Since Pres. Arroyo became president, the price of premium gasoline has increased by 147 percent, while that of unleaded gasoline has jumped by 151 percent. Regular gasoline has increased its price by 150 percent.

Socially-sensitive oil products, meanwhile, have posted sharper increases. The price of diesel grew by 168 percent while that of kerosene jumped by 196 percent.

With the unrelenting oil price increases, independent think-tank IBON calls for the immediate removal of the 12 percent VAT on oil to mitigate the effects of skyrocketing prices on poor Filipinos.

From 2005 when the Arroyo government imposed the value-added tax on petroleum products, gasoline products have increased their price by 20 percent. Diesel and kerosene prices have increased by 17 percent and 19 percent, respectively. LPG posted the sharpest increase in price since the VAT was imposed with a 36 percent-hike. Fuel oil, on the other hand, has increased its price by 31 percent.

“Removing the 12 percent VAT on oil is urgent because of falling incomes of Filipino families, and rising prices of basic goods like rice and utility rates such as electricity,” said IBON executive editor Rosario Bella Guzman.

Removing the VAT on oil, she added, would stimulate economic activity through savings by consumers on their fuel bills, while lowering operating costs of fuel-intensive business establishments.

However, a long-term solution to the uncontainable price increases of oil is the repeal of Republic Act (RA) 8479 or the Downstream Oil Industry Deregulation Act of 1998.

“Unfortunately the Arroyo government, under whose watch oil price hikes soared tremendously, continues to implement this flawed law,” Guzman said. # IBON Foundation/posted by Bulatlat

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Breaking Monopolies, Reversing Liberalization: A Step To End Rice Crisis

The presence of a rice cartel is only part of the monopoly control of land and capital in Philippine rice production, trade, and marketing and aggravated by neoliberal policies adhered to by the Philippine government
By Jennifer H. Guste

IBON Features-- As the government insists there is enough rice available for everyone, it is now looking at rationing rice to three kilos per family, and has secured the importation of around 2.2 million metric tons (MT) of rice from Vietnam, Thailand and the United States. This is the country’s biggest volume of importation since 1998.

From being a self-sufficient and rice exporting country in the 1980s, the country has become a net importer of rice since 1993. It is now the world’s top importer of rice, the country’s staple food crop.

Why this has become so can be traced to the backwardness of Philippine agricultural production and the exploitative relations of production, which are both exacerbated by globalization. Production tools are outdated, almost all farms are not mechanized, more than half are not yet irrigated, and most of all, seven out of 10 peasants are still landless. Despite three agrarian reform programs, land is still in the hands of few families who control not only land but also trade and marketing. Aggravating the condition are the globalization policies of trade liberalization, privatization and deregulation adopted by the government since the late 1980s.

Rice Production in Chronic Crisis

Philippine average rice yield per hectare is stagnant. Since the 1990s, the country’s rice yield has averaged at 3 metric tons per hectare even as it records yearly increases in production. According to the International Rice Research Institute (IRRI), the required yield for the Philippines to sustain food security is 5.4 metric tons per hectare.

Philippine rice lands is only four million hectares compared to its counterparts in Asia. For instance, Thailand devotes more than 10 million hectares for its rice production; Vietnam has more than seven million hectares planted to rice.

Rice production remains small-scale and productivity is low. This situation is even worsened by the increasing instances of conversion of rice farms to commercial uses and conversion of crops from rice to export winners, which has put the country in constant state of crisis in its rice supply.

Meanwhile, landlessness and the absence of government support through production and price subsidies leave millions of Filipino rice farmers at the mercy of big land owners and traders.

Even with the use of hybrid rice that promises a boost in rice production with minimal lands devoted to rice farming, rice supply in the country is still under threat of shortage and government will always find reason to resort to rice importation to fill in its buffer stocks. According to the National Food Authority (NFA), the country can only supply approximately 90% of its total rice consumption; the rest, according to the NFA, would have to be imported.

In reality, government has practically stopped subsidizing local agriculture for decades, and can be seen from the meager budget allocations received by the agricultural and fisheries sector. Worse, the funds intended for the sector are even reportedly siphoned off to corruption.

Even its much-hyped Agriculture and Fisheries Modernization Act (AFMA) did little in improving post-harvest facilities or even significantly increasing irrigated rice farms.

Reinforcing backwardness

Policies of globalization on rice, i.e. trade liberalization (allowing rice imports), privatization (clipping NFA powers), and deregulation (lifting of government production and price support), which the government started to implement in the 1980s, has reinforced the rice crisis.

The privatization of the NFA, for one, has been one of the conditions for the Philippine government to avail of loans from the World Bank and the Asian Development Bank (ADB). The NFA was once allowed to engage in grains procurement and distribution using government buffer stock and subsidized pricing system as main intervention instruments. But since the 1980s as a result of reforms adopted by the Philippine government to comply with the World Bank and ADB prescriptions, the role of the NFA in ensuring the country’s food security and price stabilization has been reduced to being a “facilitator” of the market forces-- the big rice traders and retailers.

The NFA has increasingly relied on rice imports for local distribution. On the other hand, from an average of 7.95% of total palay production in 1977-1983, and 3.63% from 1984 to 2000, NFA rice procurement from 2001 to 2006 was barely 0.05% of total palay production. The NFA is originally mandated to procure at least 12% of total palay production.

Other than the World Bank and ADB conditionalities for minimized NFA intervention in grains procurement and trading, under the Agreement on Agriculture (AoA) of the World Trade Organization, the country has been compelled to import a minimum volume of rice from other countries whether or not it produces rice sufficiently. Rice importation has increased as a consequence, from 0 in 1994 to 257,260 MT in 1995 and consistently increasing to 1.7 million MT by 2006.

Yet, with the current rice crisis, private traders have still renewed calls for the full privatization of the NFA. Secretary Arthur Yap of the Department of Agriculture is even entertaining options to lower tariffs on rice importation to encourage greater private sector participation in rice importation and trade. Presently, licensed private traders are allowed to import a minimum of 300,000 MT of rice but this according to the NFA has been hardly utilized by the private traders due to the 50% tariff on rice.

Ironically, instead of re-considering government subsidy to farmers’ production, an increase in the subsidy given to the NFA is even being considered to allow the state agency to shoulder some of the import costs of private importers!

Yap said the scheme would call for the NFA to import rice “through a tax-expenditure-subsidy scheme and the volume that NFA brings can be sold to the private sector for it to distribute on the basis of an equalization fee that they will bid for.” Under this plan, the private sector will be allowed initially to bring in 163,000 tons of rice this year, with each importer given a maximum volume of 2,500 tons.

Rice Price Speculation

Peasant organization Kilusang Magbubukid ng Pilipinas (KMP), on the other hand, maintains that there is no need to import rice. According to the group, if the projected 7.2 million MT palay output for this season is met, combined with the total rice inventory as of March 25, then there should be enough rice available for every Filipino table until the first week of October, even without importation.

In an interview with IBON Features, KMP chairperson Rafael Mariano said that the government is importing rice because it has already committed rice importations earlier from Vietnam and the US.

He said the NFA is importing rice because it has persistently failed to perform even its minimal procurement of 12% of the total palay production. Mariano added NFA has only procured only about 1% of palay production in the last cropping season, leaving most of the tradeable rice into the hands of big rice traders, particularly the so-called Big Seven cartel who now dictates the price of rice in the market.

In fact, a few days after the DA wrote a memorandum to the office of the President warning of the threat of a tightening global rice supply and thus the need to secure rice imports, news of a rice shortage in major markets in the NCR and in the provinces broke out. Subsequently, rice prices skyrocketed and created panic among rice retailers and consumers nationwide.

The same thing happened during the rice crisis in 1994-1995, largely a result of the semi-privatization of NFA which then procured only 0.5% of total palay production. Private traders seized the opportunity to create an artificial rice shortage and jacked up prices by as much as 90% to 100 percent.

The monopoly control in the trade and marketing of rice through the so-called Big Seven manipulates rice price increases especially during rice crises. The reduced role and intervention of the NFA in the rice market allows private traders to control both the trade in inputs and produce, thus influencing the movement of prices in the trade and marketing of rice.

Despite its import injections, the NFA’s limited distribution because of its minimal palay procurement also prevents the NFA from influencing retail rice prices. In fact, the NFA has distributed an annual average of only 6% of the nation’s rice requirements, and much of the rice distributed is even imported.

Ending Monopolies

The presence of a rice cartel is only part of the monopoly control of land and capital in Philippine rice production, trade, and marketing. It is a manifestation of the chronic rice crisis in the Philippines, which is aggravated and reinforced by neoliberal policies adhered to by the Philippine government.

There are doable measures to solve the chronic rice crisis the country. One step that government should do is to regain control of the trade and marketing of palay and rice to break the monopoly control of cartels. The country should also break away from binding agreements that government made to the GATT-WTO and reinstate agricultural tariffs while increasing support to Filipino farmers. Ultimately the crisis could be resolved by implementing a genuine agrarian reform program that do not only provide free distribution of land to farmers, but also provides input and capital subsidies, and investments in post-harvest facilities that will help end land monopoly. # IBON Features

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Bayan to gov’t: Price controls are imperative
News Release
April 7, 2008

Amid escalating prices of oil, rice, flour and other basic commodities, the umbrella group Bagong Alyansang Makabayan today asked the government to employ price controls and measures such as the suspension or removal of VAT on oil and power, to provide immediate economic relief for poor consumers.

Last weekend, oil prices again rose by 50 centavos per liter while government expects food prices to remain high due to internal and external factors.

“The consumers should not be left at the mercy of the free market. There should at least be some protection from skyrocketing prices during these times of crisis. That is government’s role, to protect consumers,” said Bayan secretary general Renato M. Reyes, Jr.

“Government should stop acting as if it’s helpless in the face of the crisis. Consumers are growing restless over the successive economic black eyes that they have faced the past month,” Reyes added.

Bayan is demanding controls in the prices of oil by the scrapping of the oil deregulation law and the removal of the Value Added Tax on petroleum products. It has also pushed for controls in the prices of rice and for the National Food Authority to expand its procurement of domestic rice instead of importation.

Bayan in the past has asserted that oil and rice, two very vital commodities in the Philippines, are “cartelized.” The oil industry is being run and dominated by the so-called “big three” oil companies of Shell, Caltex and Petron. Meanwhile, it is widely believed that a “rice cartel” also exists in the Philippines and is responsible for setting high commercial rice prices.

“It’s not surprising that multilateral agencies such as the International Monetary Fund and World Bank are staunchly opposed to price controls and government subsidies for consumers. They want a deregulated environment wherein big business can maximize their profits,” Reyes said.

“So far, all government efforts now have evaded the crucial question of high prices. Both the Energy Summit and the Food Summit put forward measures that have no direct impact on lowering the prices of oil and rice. It’s as if price controls were taboo nowadays,” Reyes added.